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- [00:01]
Kai Rysdal
Our lane and sticking to it, the guts of how this economy works is where we start today. From American Public Media, this is Marketplace in Los Angeles. I'm Kyle Rysdal. It is Wednesday today. This one is the 19th of February. Good as always to have you along, everybody. This program, as I have said a couple of times over the past couple of weeks, cannot and will not chase every pronouncement that comes out of the White House. We can and will, though, cover decisions by the Trump administration that are of systemic economic importance, which is how we find ourselves starting today, with an executive order entitled Ensuring Accountability for All Agencies in which President Trump claims for himself direct control over key agencies in this economy. Think the Federal Trade Commission, the securities and Exchange Commission, the Fed agencies that have traditionally and congressionally exercised independent authority. Sarah Binder is a professor of political science at George Washington University. Professor, welcome to the program. Good to have you on.
- [01:17]
Sarah Binder
Great. Thanks for having me.
- [01:18]
Kai Rysdal
With the understanding that Congress did set up these agencies as independent agencies. I guess the first question is, can the President do what he is purporting to do here?
- [01:27]
Sarah Binder
Well, the President can do it if nobody stops him. Right. It's a power grab this time at the expense of what we call these independent agencies. The question is, will anyone in Congress stand up to him? And at some point this will certainly end up before the federal courts. And so will the courts be able to constrain the President? That we just don't know.
- [01:49]
Kai Rysdal
Help us understand, would you, why Congress decided decades and decades ago that this economy needs independent regulatory agencies to. To help this economy run?
- [02:00]
Sarah Binder
Well, keep in mind that the very first of these independent agencies were really the end of the 19th century. And it was a period like today of pretty high partisanship, right? Intense electoral competition, frequent shifts in party control. So progressives are looking for ways to insulate these sort of implementers of law from politics and especially from presidential whimsical. And so the solution is Congress says, let's find a way to insulate the decision makers, who the leaders are and how they wield their power, but also the decision making, like how much review is done by Congress and the President and the courts over these agencies.
- [02:45]
Kai Rysdal
It will not surprise you, even though this order purports to cover the Federal Trade Commission, the Federal Communications Commission and the SEC and a bunch of them. My eyes went to the Federal Reserve and that section that is in this order saying this covers the Federal Reserve except for its monetary policy operations. The catch, of course, with the Fed is they do lots of other stuff that stabilizes this economy. Right. They are famously the lender of last resort in a crisis. And I guess I wonder how concerned you are about the gray areas that have to do with the guts of this economy.
- [03:16]
Sarah Binder
Well, that is quite problematic because it's really hard to say, even on something like emergency lending, like where does monetary policy start and where does reg and soup, right. Supervision and regulation, where does that begin? So emergency lending, the stabilizing a financial crisis, well, that's also part of the Fed's ability to try to control inflation. So it's hard to say where the boundaries of where the President is going to be sticking his nose into those decisions. And of course, right. We expect the Fed. The Congress tells the Fed, you are in charge of financial stability. At least one of the agencies in charge is financial stability. And the Fed uses monetary policy. Right. To meet that regulatory goal. So I think there's a lot of question marks from that executive order about how much autonomy the Fed really can keep with letting the President and OMB anywhere into its decision making.
- [04:11]
Kai Rysdal
Step back for a minute here then, and talk about the. The other and the many institutions of this economy that are now going to be subject to much more direct presidential control. What is at stake for this economy?
- [04:22]
Sarah Binder
Well, the first thing at stake is that it will make it harder for the Fed to keep its eyes on and try to control inflation, which still isn't down to its 2% target, but also some general sense of financial stability, that banks are being regulated across the board, big banks, small banks, community banks, but even handedly. And I think whenever you have some stronger tinge of presidential control, people are going to wonder like, is that a legitimate exercise of power? Am I better off? Right. Do I know what's going to happen in the future? And certainly in an economic realm that's put at risk by injecting presidential and partisan interests into the decision making of these agencies.
- [05:05]
Kai Rysdal
Do you think this is a legitimate exercise of presidential power?
- [05:08]
Sarah Binder
Well, I think it grabs power from Congress who set up the rules of these agencies in the first place. I think in my view is patently unconstitutional. Right. Because the executive order would allow the executive branch to decide how are you going to spend that money. Right. Those are decisions that Congress either gives to the agency or certainly sets the budget for many of them and expects those monies to be spent in the ways Congress directs. So grabbing that power, seems to me you've taken an equal branches key authority, you've just taken it away.
- [05:40]
Kai Rysdal
Let me take you sideways for a second. Since you went there. Are you surprised that the Article 1 branch, that is to say the Congress is letting its power be taken so easily by the Article 2 branch, the executive?
- [05:54]
Sarah Binder
Well, when I teach undergrads Congress, we always start it's Article one. Why is it there? It's the most important institution, but it has to stand up for itself. The Constitution, it doesn't protect itself. It's not self enforcing. And so this is not the first time that Congress has sort of stepped back and watched as presidents have encroached on their powers. Sometimes Congress does it on purpose. Hey, president, here's some power to give sanctions, here's some power to negotiate trade deals and so forth.
- [06:22]
Kai Rysdal
Tariffs also. Oh, by the way. Right.
- [06:24]
Sarah Binder
For sure, for sure. And Congress does that explicitly. Much of this is Congress is doing, but certainly this is Trump really, really going much farther than we've ever seen other presidents do.
- [06:35]
Kai Rysdal
Sarah Binder, she's at Brookings. She's also at gw. Professor, thanks for your time, ma'am. I appreciate it.
- [06:40]
Sarah Binder
Thanks for having me.
- [06:42]
Kai Rysdal
Wall street midweek with all the politics of this economy still. Fine. We'll have the details when we do the number.
- [07:10]
Henry Epp
Foreign.
- [07:14]
Kai Rysdal
It'S been downright cold across much of the country the past couple of months, which helps account for what I am about to tell you. Housing starts just like it sounds. The number of new homes for which ground was broken fell 9.8% between December and January. But weather aside, there are other signs that homebuilders aren't feeling quite so great about things right now. The national association of Home Builders confidence index is the lowest it's been in five months. Mortgage rates, as we know, are stuck near 7. And tariffs are, of course, in the offing. Marketplace's Henry Epp is on the homebuilder uncertainty beat for us today.
- [07:50]
Odette Kushi
The NAHB did its survey right around the time President Donald Trump proposed and then paused 25% tariffs on imports from Canada and Mexico. So that really weighed on homebuilder sentiment. But builders are hoping for some good news too, says Odette Kushi, deputy chief economist at First American.
- [08:06]
Kai Rysdal
They're also thinking that there might be.
- [08:08]
Susan Wachter
A better regulatory climate for building.
- [08:10]
Odette Kushi
That's the case for Bart Frisbie, president of Sterling Homes in Vermont, a state where lawmakers have loosened some permitting laws in the last few years to encourage more housing construction. Frisbie has a couple projects in the pipeline, including a brand new 32 home neighborhood.
- [08:25]
Sarah Binder
We're optimistic the market's going to keep.
- [08:29]
Kai Rysdal
On rolling forward, but a lot of.
- [08:31]
Odette Kushi
His lumber comes from Canada. So if President Trump puts an import tax on that, it will increase the.
- [08:37]
Kai Rysdal
Price of houses dramatically. And that's the last thing we need.
- [08:42]
Odette Kushi
Is to raise prices because a lot of prospective home buyers are staying on the sidelines with mortgage rates around 7%, says Susan Wachter, professor at the University of Pennsylvania.
- [08:53]
Sarah Binder
Builders are meeting price resistance in the market, and there's not much builders can do because their costs are going up.
- [09:00]
Odette Kushi
Still, there's a strong need for new housing. We're about 1.5 million units short, says Danushka Naniokara at the National Associ association of Home Builders. So the demand is there.
- [09:11]
Sarah Binder
The question is the affordable, the entry level housing. The lack of that is pushing people out of the housing market, and that's the issue right now.
- [09:24]
Odette Kushi
And if rates stay elevated and tariffs make building materials more expensive, she says, that issue won't go away. I'm Henriett for Marketplace.
- [09:56]
Kai Rysdal
Etsy's had a rough week. Shares in the artisanal merchandise company were off better than 9% today, no small part because it reported a worse than expected fourth quarter even as consumer spending was growing at the end of last year, as we've told you, and the company said it expects this quarter to be stuck in the doldrums as well. Although that is not entirely Etsy's fault, as Marketplace's Kaylee Wells explains.
- [10:19]
Henry Epp
Etsy got its name from offering stuff like handcrafted candles and custom wedding guest books, but it also started offering cheap, mass produced stuff, and that market is crowded with competition.
- [10:31]
Brett House
The trick is, is that on temu, the price is lower. Same thing with Amazon.
- [10:37]
Henry Epp
Supply chain consultant Britain Ladd says he thinks Etsy has likely peaked and so.
- [10:42]
Brett House
It'S going to be very challenging for Etsy to do something that's so special that it pulls all those other customers away.
- [10:50]
Henry Epp
Etsy's strategy so far is to double down on the artisanal stuff, says Sky Canavas. She's a retail analyst at eMarketer.
- [10:57]
Sarah Binder
That focus is likely to appeal to a smaller audience, and so we would expect to see their sales continue to contract in line with that because this.
- [11:07]
Henry Epp
Trend of consumers seeking cheaper prices isn't going anywhere. Economics professor Brett House at Columbia Business School says years of high prices have put more strain on consumers.
- [11:17]
Brett House
Credit card defaults are up, credit balances are up, and people are likely cutting back on some of their discretionary spending.
- [11:25]
Henry Epp
The weird part is the fourth quarter's typically a strong one for consumer spending because of all the holiday shoppers. But this season was different.
- [11:33]
Brett House
They also saw the election results in November and the increased policy uncertainty that came along with that.
- [11:41]
Henry Epp
There is another way out, though, consultant Britain Ladd says the best next move for Etsy might be getting acquired by Michaels or ebay. I'm Kaylee Wells for Marketplace.
- [11:52]
Kai Rysdal
So let's talk about that last piece of sound in Kaylee's piece there, that line from the guy at Columbia about consumers reacting to the election results. Turns out, according to a new Harris poll, that since the election, more than 40% of consumers, 4 0% of consumers have changed their spending habits to align with their beliefs. A quarter have stopped buying from their favorite brands, and about a third say they have no interest in supporting the economy this year and are looking for ways to opt out. Marketplace's Samantha Fields has more on that one.
- [12:22]
Samantha Fields
More Democrats say they've changed their spending habits recently than Republicans, according to the Harris Pollution. Timothy Werner at UT Austin says that makes sense, given who's in power in Washington right now.
- [12:33]
Kai Rysdal
During the first Trump administration, there was.
- [12:36]
Timothy Werner
A campaign called Grab youb Wallet to.
- [12:38]
Samantha Fields
Try to get people to not spend money at any companies associated with Trump.
- [12:42]
Kai Rysdal
And you saw no kind of dynamic that was on the other side being supportive of him.
- [12:47]
Samantha Fields
When people are angry with a company over its politics, he says, it's typical for them to stop shopping there, at least for a while. Whereas when people support a company's politics, they aren't as likely to shop there more. Bruce Fried at the center for Political Accountability says economic boycotts are increasingly common.
- [13:05]
Sarah Binder
As our politics have become much more polarized and much sharper. You have consumers now who are taking a look very closely at what companies are involved with.
- [13:14]
Samantha Fields
The idea of opting out of the economy entirely, though that feels new, at least to John Gersma at the Harris Pollution.
- [13:21]
Brett House
Just stepping back for a second and.
- [13:23]
Kai Rysdal
Thinking about how important consumerism is to America's GDP.
- [13:27]
Brett House
You know, it's 70 cents on the.
- [13:29]
Samantha Fields
Dollar, so if a third of consumers were to stop spending even just for a little while, he says, that could have a big impact. But Timothy Werner at UT Austin says.
- [13:39]
Kai Rysdal
It probably won't, especially as attention spans shorten and news cycles shorten. The effects of these things are really very short lived.
- [13:49]
Samantha Fields
And for businesses, getting involved in politics through donations and lobbying is often worth it.
- [13:55]
Kai Rysdal
Companies who spend more on lobbying secure more government contracts. They pay lower effective tax rates. They generally benefit from lighter touch regulation.
- [14:05]
Samantha Fields
And that can affect their bottom line in a way consumer boycotts rarely do. I'm Samantha Fields for MarketPL.
- [14:40]
Brett House
Coming up, I really don't think that we've used voice in the way that many of us have dreamed about dreaming.
- [14:47]
Kai Rysdal
About actual AI voice assistants. But first, let's do the numbers. Dow Industrials up 71 points today two 10% on the blue chips 44,627. The NASDAQ lifted 14 points, about a 10% 20,056. The S&P 500 also grew 14 points. That's almost a quarter percent on that index. 61 and 44. Intel has had a roller coaster. Weak stocks rose on news that competitors TSMC and Broadcom might take it over. Yet today intel dropped 6 and a 10%, TSMC down 9 10%. Broadcom grew about a 10% today. Electric and hydrogen truck maker Nikola has filed for Chapter 11 bankruptcy protection and is finally the company said it has liabilities of up to $10 billion. Nikola plunged 39 and a 10%. That 10% is the important part there. Tesla grew 1 and 8 10%. Thor Industries down 2 and 2 10%. Telehealth company HIMSS and Hers Health announced it's acquiring Sigmund, also known as Tribe Labs, which will allow Hims and hers to offer home lab testing. Shares up 17.5% on the day. Bonds up yield on the 10 year tino, down 4.53%. You're listening to Marketplace. This is Marketplace. I'm Kai Rysdal. It is, as we have learned by now, folly to predict what might or might not happen with tariff policy in this second Trump administration. But if all goes according to the president's promises, in less than a month there are going to be new 25% tariffs on all steel and aluminum that enters this country herewith, by the way, the obligatory reminder that tariffs are paid by the importer and by extension and ultimately by the consumer. That said, there is some research from S and P Global Ratings that shows the impact of higher tariffs will be uneven. Some businesses are going to pass costs along, others might not. And as Marketplace's Justin Ho reports, what side of that line a business falls on depends on who its customers are.
- [17:06]
Justin Ho
Maverick's manufacturing partners in Escondido, California, makes metal components for the energy and defense sectors. That's the sound of an employee at the company last April welding a piece of steel, one of the metals set to get hit with higher tariffs next month. Meanwhile, the price of the other metal, aluminum, is already rising, says Chris Blench, the company's CEO.
- [17:29]
Timothy Werner
The tariffs don't even have to be in effect. It's just the threat of them. And that's creating a tremendous amount of uncertainty.
- [17:36]
Justin Ho
As a result, Blench says, he's going to have to ensure that the prices he's charging his clients account for that uncertainty. So now when he writes up a bid for a project, we'll just have.
- [17:46]
Timothy Werner
That one little asterisk on the material component that says, you know, depending on the pricing of that particular material at the time of award, we're going to pass on whatever our cost is.
- [17:57]
Justin Ho
Blinch says he can do that because his customers, largely the Defense and Energy departments, are so big that they're not going to sweat the increase. And besides, his competitors do the same thing.
- [18:08]
Timothy Werner
We're trying to compete on our efficiency and other credentials of our businesses, but when it comes to the raw material, the price goes up 25%. All of the other competitors are going to be passing that along.
- [18:19]
Justin Ho
Not every business has the leverage to do that. Satyam Pandey is chief US and Canada economist at S and P Global Ratings. He says if your customers are small businesses, for example, you would probably want.
- [18:31]
Sarah Binder
To think twice before doing that in your renegotiations of the contract.
- [18:36]
Odette Kushi
You probably have to share the cost.
- [18:39]
Justin Ho
There's also a third kind of business where passing along the cost of tariffs might not make sense at all.
- [18:45]
Kai Rysdal
You know, beer has always been this affordable luxury. It should be very accessible.
- [18:50]
Justin Ho
That's J.C. hill, the owner of Alvarado Street Brewery, which operates a few locations in the Monterey Bay area in California. And because he sees beer as an affordable luxury, he doesn't want to pass along any cost increases to his customers, especially after all of the inflation in recent years and in the past, we.
- [19:07]
Kai Rysdal
Have been able to raise prices to not take that hit directly before inflation. I think now people are less likely to want to pay more.
- [19:16]
Justin Ho
Hill says he's expecting the price of aluminum cans to rise, along with the price of stainless steel fermenters, kegs, and other equipment. He says he's keeping an eye out for used equipment. He doesn't want to have to do anything drastic like lay off employees.
- [19:30]
Kai Rysdal
You know, it might just be one of those things where we just have to wear it on the chin and hopefully, you know, ride it out.
- [19:36]
Justin Ho
In the meantime, Hill says his goal is to keep growing the brewery's capacity a little bit every year so he can cover his costs by selling more beer. Hi, I'm Justin Ho for Marketplace.
- [20:12]
Kai Rysdal
Technology moves quickly. We see that every day, this or that new gadget or software doing amazing new things. Unless you're talking about what are by now the old reliable siri and Alexa upgrades were supposed to be coming for both this spring, but have been pushed back, which sets them back as they play catch up to ChatGPT and all the new tech kids on the block. Marketplace's Megan McCarty Carino looks at how voice assistants fell behind and where they might be going.
- [20:40]
Susan Wachter
When Apple unveiled Siri at an event back in 2011, the tech seemed revolutionary.
- [20:46]
Sarah Binder
I am a humble personal assistant.
- [20:51]
Susan Wachter
Scott Forstall, Apple's senior VP of iOS software, gave the demo.
- [20:56]
Justin Ho
Let's say you need to set an alarm clock. Just ask Siri. Wake me up tomorrow at 6am.
- [21:04]
Sarah Binder
Okay, I said it for 6am 13 years.
- [21:08]
Susan Wachter
Later, and Sean Salisbury, a software entrepreneur in Oceanside, California, says that's about all he uses Siri for.
- [21:17]
Brett House
Just simple reminders on my phone. Just, you know, remind me to do this or remind me to do that.
- [21:22]
Susan Wachter
Siri has gotten updates over the years. You can now set two timers at once. But Salisbury says it still struggles with basic requests like I'll get an email.
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Brett House
And I'll tell it like, hey, read me this email. The one that I have open. You know, read me this email. And it just reads me the last. The, the titles of the last five emails I've got.
- [21:42]
Susan Wachter
It just says starting with your priority.
- [21:44]
Henry Epp
Mail from Facebook security alert.
- [21:47]
Brett House
I don't need to know my Facebook security alert.
- [21:51]
Susan Wachter
Alexa from Amazon, a Marketplace underwriter, can also set timers well, but Grant Berry uses his eight Echo devices to control home electronics like his lights or alarm system.
- [22:02]
Kai Rysdal
I'm able to say what to do exactly using very precise language.
- [22:07]
Susan Wachter
Barry is a professor of language science at Villanova University who also worked on Alexa technology for Amazon. He says improvements in natural language processing, the way computers understand human language, have helped voice assistants like Alexa become more conversational over time. But they're still more rigid than modern AI chatbots.
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Kai Rysdal
Alexa can tell you jokes, but they're all really bad dad jokes. Ask her what her favorite color is.
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Sarah Binder
I like ultraviolet. It glows with everything.
- [22:39]
Susan Wachter
That's her answer every time.
- [22:41]
Kai Rysdal
And you know someone hard coded that in. Yeah, had to have.
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Susan Wachter
Most people don't need stand up from their voice assistants, but Barry says using more sophisticated AI language models like those powering ChatGPT will make it easier to communicate with devices the way we do with people.
- [22:58]
Kai Rysdal
It is natural for us to omit information or reference back to things that.
- [23:04]
Odette Kushi
Have been previously stated.
- [23:06]
Susan Wachter
You might ask, hey, Siri, who is the president of France?
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Brett House
Emmanuel Macron is the president of the French Republic.
- [23:13]
Susan Wachter
Then just use a pronoun how long has he been President?
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Brett House
It started May 14, 2017.
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Susan Wachter
Okay, how many years is that?
- [23:22]
Brett House
It started May 14, 2017.
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Susan Wachter
Still needs some work. ChatGPT tells me it's been seven years and nine months. OpenAI's chatbot can carry on spoken conversations, as can Google Gemini. But today's top AI systems are typically thought of as typing based, says Larry Heck, an engineering professor at Georgia Tech who has worked on voice assistants for Microsoft, Google and Samsung.
- [23:49]
Brett House
I really don't think that we've used voice in the way that many of us have dreamed about.
- [23:54]
Susan Wachter
He wants an AI conversation partner. He could ask for help, say, brainstorming his trip to Italy.
- [24:01]
Brett House
The AI says, oh, you know you're interested in staying at a medieval castle in Tuscany. Oh, you know what? I found a few places. These are kind of cool. What do you think about these?
- [24:11]
Susan Wachter
Currently, he says, even the most advanced AI systems can only engage in so much back and forth. They find an answer or confidently make one up instead of asking follow up questions. That's not great if you want a voice assistant you can trust to make purchases or appointments, potentially at a monthly fee. Even if voice assistants do improve, users like software entrepreneur Sean Salisbury might not bother right now.
- [24:38]
Brett House
It's hard for me to think of what I would do because I've been frustrated with it.
- [24:42]
Susan Wachter
Hey Siri, remind me to try you out again once you get updated. I'm Megan McCarty Carino for Marketplace.
- [25:05]
Kai Rysdal
This final note on the way out today in which I read you a sentence from the minutes of the most recent meeting of the Interest rate setting Federal Open Market Committee, the one back in January, and then translate that sentence into regular person English. Here you go. The current high degree of uncertainty made it appropriate for the committee to take a careful approach in considering additional adjustments to the stance of monetary policy. You know, actually, that's pretty clear already, isn't it? Uncertainty, careful approach. It's all right there for the picking. Our media production team includes Brian Allison, Jake Cherry, Jessen Dueler, Drew Jostad, Gary O'Keefe, Charlton Thorpe, Juan Carlos Rado, and Becca Weinman. Jeff Peters is the manager of media production. I'm Kai Rysdal. We will see you tomorrow. Everybody, this is apm.